Treasury Secretary Janet Yellen on Tuesday told House Speaker Nancy Pelosi (D-Calif.) the Treasury Department will exhaust its ability to pay the nation’s bills if Congress fails to raise or suspend the debt limit within three weeks, giving lawmakers an urgent timeline to act on crucial funding measures as they reach a standstill over policy priorities.
In a letter to the House Speaker on Tuesday morning, Yellen said recent tax payments for businesses and individuals have made it clear the Treasury would be left with “very limited resources that would be depleted quickly” if lawmakers have not acted on the debt limit by October 18.
Yellen cautioned it is “uncertain” whether the Treasury will be able to meet the nation’s financial commitments after that date, though she noted the estimate could unexpectedly move backward or forward.
The timeline’s uncertainty “underscores the critical importance” of not waiting to raise or suspend the debt limit, she added, cautioning lawmakers against reaching an impasse by noting past disagreements have caused “serious harm to business and consumer confidence.”
Her comments echoed a message from the White House earlier this month, when officials warned of increased stock market volatility if the debt limit debate drags on and pointed out the S&P 500 fell by 17% in months during a prior debt limit standoff in 2011.
“Failure to act promptly could also result in substantial disruptions to financial markets, as heightened uncertainty can exacerbate volatility and erode investor confidence,” Yellen wrote Tuesday.
The United States reached its debt limit of $28.5 trillion in late July and has since been taking “extraordinary measures,” such as stopping investments in federal pension programs, to stop the government from defaulting on its obligations, the White House wrote in a letter to state and local governments on September 17. If the U.S. defaults, federally funded programs—including disaster relief efforts, medicaid and infrastructure funding—could all be halted, the White House said. “Hitting the debt ceiling could cause a recession,” officials wrote, adding economic growth would falter, unemployment would rise and the labor market could lose millions of jobs as the federal government cuts off funding to state and local governments, forcing them to enact budget cuts to keep up with education and healthcare costs.
Senate Republicans voted Monday evening to block a House-passed continuing resolution aimed at keeping the government open through December because it included a provision to suspend the debt limit for another year. Though Democrats are eager to raise or suspend the debt limit to help shore up funds for the party’s lofty policy ambitions, many Republicans—who voted to suspend the debt limit three times under former President Donald Trump—have blasted the efforts, citing concerns over heightened inflation. Democrats have yet to introduce a separate funding measure, but Sen. Pat Toomey (R-Pa.) told CNN on Sunday that Republicans will likely introduce a stand-alone continuing resolution without the debt limit provision this week. It’s still unclear what measures Democrats will take to raise the debt limit.
White House Warns US Could Plunge Into Recession If It Hits Debt Ceiling Next Month (Forbes)
Senate Republicans Block Bill To Temporarily Fund Government, Raise Debt Limit (Forbes)
A Government Shutdown Is Just 3 Days Away—Here’s What Would Happen If Lawmakers Don’t Strike A Deal (Forbes)